At a conference titled "Erroneous Autonomy: The Catholic Case Against Libertarianism," Cardinal Oscar Rodriguez Maradiaga attacked the free market, calling it "a new idol."
This is my response. I understand that in writing it, I am assuming that in each case the reporter who covered Cardinal Rodriguez Maradiaga's talk is quoting him accurately. If that turns out not to be the case, then my apologies to the Cardinal. Every time I quote the Washington Postarticle, I'll put it in the colored box.
The pope, Rodriguez Maradiaga said, grew up in Argentina and "has a profound knowledge of the life of the poor." That is why, he said, Francis continues to insist that "the elimination of the structural causes for poverty is a matter of urgency that can no longer be postponed."
That makes sense. Argentina has a lot of poverty. Unfortunately, it doesn't have a lot of the free market. Although about a century ago, Argentina was among the leaders of the world in per capita GDP, decades of Peron-type policies--price controls, cronyism, redistribution etc.--have hurt Argentina's economic growth. So it's hard to see how the Pope's experience would support non-free-market policies.
Instead, he said, solidarity with the poor, as envisioned by Catholic social teaching, calls for "dealing with the structural causes of poverty and injustice." The cardinal stressed that the church "by no means despises the rich," and he said Francis "is also not against the efforts of business to increase the goods of the earth."
Good. That's a good start. So what are the structural causes of poverty and injustice? One way to tell would be to look around the world and see where the greatest poverty is. A large amount of it, percentagewise, is in Africa. The problem in Africa is not that there's too much capitalism, too much economic freedom. The problem is the opposite.
Trickle-down economics, he said, is "a deception," and he declared that the "invisible hand" of the free market -- the famous theory advanced by the 18th-century philosopher Adam Smith -- was instead being used as a cruel trick to exploit the poor.
His first clause is absolutely correct. "Trickle-down economics" is a deception. But the ones who are guilty of the deception are people on the left. They are the ones who use the term and probably coined the term. I know of no free-market economist who uses that term. And the reason we don't is understandable. What the free market really produces is gush-down economics. The incentive to save, invest, invent, and innovate has given poor people enormous wealth. Karl Marx acknowledged the wonderful results of free markets in the 19th century and Brad DeLong acknowledged and celebrated them in the 20th century. As for the the invisible hand being used to exploit the poor, that's possible. There are many charlatans around. It's quite conceivable that some of them have argued for their cronyist policies by hijacking Adam Smith.
Karl Marx wrote that the bourgeoisie was:
...the first to show what man's activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades.... [It has], during its rule of scarce one hundred years...created more massive and more colossal productive forces than have all preceding generations together. The subjection of nature's forces to man, machinery, the application of chemistry to industry and agriculture, steam-navigation, the railways, electric telegraphs, the clearing of entire continents for cultivation, the canalization of rivers, the conjuring of entire populations out of the ground-what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor? (Quoted in Brad DeLong, "Cornucopia: The Pace of Economic Growth in the Twentieth Century," NBER Working Paper #7602, March 2000.)
And yet, points out DeLong:
Karl Marx was dumbfounded at the pace of the economic transition he saw around him in the middle of the nineteenth century. Yet compared to the pace of economic growth in the twentieth century, all other centuries--even the nineteenth century that so impressed Karl Marx--were standing still.
"But now they are trembling before the book of Piketty," he said with a laugh, referring to the controversial best-seller on the wealth gap by the French economist Thomas Piketty. "At least it is making them think," he added.
I don't observe trembling as much as I observe disagreement. People like Larry Summers have criticized Piketty's underlying model. People like Phil Magness and Chris Giles have criticized his data. And Robert Solow, the founder of modern economic growth theory and one of Piketty's most prominent defenders, points out that if Piketty gets his way with tax policy, real wages will stagnate. So the people whom Piketty should have trembling are the poor and middle-class. The stagnating wages that would result from Piketty's preferred policies would substantially decrease their chances of becoming better off.
On one hand, we libertarians could play "ain't it awful" that Catholic University held a conference explicitly devoted to attacking libertarianism. But with my glass-half-full way of looking at things, I see this differently.
First, I think it's wonderful that some prominent people see us as important enough to attack. When I became a libertarian in 1968, we used to joke that all the libertarians could have a conference in someone's living room. We've come a long way, baby.
Second, notice how tone-deaf and uninformed the Cardinal is. It's always a good sign when those who attack us show little understanding of history or economics. It's an especially good sign when that happens at a conference where people who present had a fair amount of time to put their presentations together. If that's all they've got, then the struggle should be easier than I had thought.